VW’s U.S. Diesel Accord to Be Overseen by Ex-Enron Prosecutor

By Tom Schoenberg, Bloomberg News

When Volkswagen AG is sentenced in the U.S. on Friday for rigging emissions tests, it will get a court-appointed monitor to make sure it stays in its lane. That person, according to two people familiar with the matter, is a former chief of the government’s prosecution of Enron who more recently served as chief counsel for PepsiCo Inc., two people familiar with the matter said.

Larry Thompson, who served as deputy attorney general under George W. Bush, was chosen by the company and approved by the Justice Department for the three-year post, said the people, who asked not to be named because the choice hasn’t been made public. Thompson’s selection is likely to be announced when the automaker is sentenced in federal court Friday.

Thompson will oversee the automaker’s compliance with the Justice Department’s settlement agreement as well as make sure the company is following through with a consent decree in a massive civil resolution with consumers and states in federal court in California. He’ll also be tasked with assessing the company’s compliance program in order to prevent future criminal fraud or environmental violations.

Thompson and Volkswagen didn’t immediately respond to messages seeking comment. The Justice Department had no immediate comment.

 

Deputy Attorney General, Larry Thompson, speaks at a press conference at the Department of Justice in Washington, DC on July 24, 2002 about Adelphia Communications Corp. founder John Rigas, his two sons and two other former executives being charged with looting the company of more than $1 billion, driving the sixth-largest U.S. cable company into bankruptcy. Photographer: Dennis Brack/ Bloomberg News.
Then-Deputy Attorney General, Larry Thompson, speaks at a press 2002 conference at the Department of Justice in Washington, DC. Photographer: Dennis Brack/ Bloomberg News.

Diesel-Cheating Scandal

Choosing a monitor is one of the final pieces to fall into place as Volkswagen tries to put the U.S. criminal emissions case behind it. The scandal muddied VW’s reputation and temporarily threatened its viability and ability to compete with Toyota Motor Corp. as the world’s biggest carmaker. The Wolfsburg, Germany-based company admitted in 2015 that about 11 million diesel cars worldwide were outfitted with so-called defeat devices, which allowed the vehicles’ onboard computers to lower emissions when they detected test conditions. VW pressed to resolve investigations and lawsuits quickly, while working to repair its reputation with car buyers and dealers.

VW reported higher-than expected first quarter earnings Tuesday, fueled by a comeback of the company’s namesake brand.

The updated Tiguan sport utility vehicle and cost reductions helped the VW brand generate a margin of about 3.5 percent, according to an estimate from Evercore ISI.

VW’s plea agreement requires that the company monitor be someone who has experience with federal anti-fraud and environmental laws, corporate ethics, automotive industries, and “sufficient independence” from the company.

Thompson, who also worked for Ford Motor Co. early in his career, was appointed to the Justice Department’s No. 2 post in 2001 and a year later was tapped to lead the administration’s corporate fraud task force, which included its investigation into Enron Corp.

During his stint as deputy attorney general, Thompson contended with a spate of corporate scandals, including Arthur Andersen and WorldCom, in addition to Enron.

Thompson Memorandum

Faced with increasing evidence of wrongdoing in corporate America, he issued a memorandum to federal prosecutors saying that corporate defendants could earn points for cooperation only if they voluntarily waived their attorney-client privileges and stopped paying for their employees’ legal representation.

The Thompson Memorandum, as it became known, stirred up controversy among corporations and the defense bar. It was rolled back a few years later after a federal judge in 2006 ruled that the Justice Department’s prosecution of the KPMG auditing firm violated the rights of several KPMG employees.

Following that, the government issued a new set of guidelines, backing away from the controversial parts of the Thompson Memorandum.

Upon leaving the government in 2003, Thompson was named to the board of Delta Air Lines Inc. He was hired by PepsiCo in 2004, where he served as its chief lawyer for about a decade. He was eventually followed in the PepsiCo post by another former top Justice Department official, Tony West.

Since 2015, Thompson has been counsel to a small Atlanta law firm Finch McCranie LLP. He also teaches corporate and business law at the University of Georgia School of Law.

Thompson will be tasked with inspecting company documents, making on-site visits and interviewing officers and employees.

He’ll then make regular reports and recommendations to VW’s management board and the Justice Department.

Any potential misconduct found by Thompson would be reported to VW officials, and possibly the Justice Department, according to the plea agreement.

–With assistance from Greg Farrell.

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